Long distance Investing

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Long distance Investing

Alexander Reda
Rental Property Investor · Member since 2019 · 48 posts · 14 votes

How would you go about deciding on what area to invest in? For example, would you randomly pick an area and start researching using the Census?  Or would you contact PM Companies in an area you're curious about and pick their brain? 

My criteria for an area is like most others. Job growth, population growth, landlord friendly, Diverse Economy, pretty much an up-trending area. The only problem is that I don't know where to start looking or how to begin with doing my research. I guess my main question is, whats the first thing you look for in deciding where to invest? how do you break it down into portions to where you're not wasting your time in investigating an area? Right now for me it's overwhelming. 

I should note that I'm a newbie and have not had my first deal yet. I'm currently looking in a "hot market" where prices are high and hard to find deals. Boots on the ground is probably best strategy for this area but realistically that option is hard for me to do with my current job. I do have an agent who is an investor herself who has done flips in the past and I have been in contact with PMs as well. Both agree its possible. 

My goal is to buy and hold long term. BRRRRing is what I'm looking to do. A wise man (or lady) once said, "live where you want, Invest where it makes sense". It's time to put fear aside follow that wisdom. 

I just got done reading David's book on BRRRR (twice) and currently listening to it on audible the third time. Also read Brandon's book on "Rental Property Investing". I am about to purchase David's book on Long Distance Investing and read that a couple times as well. Just wanted to pick the brains of people who have done long distance investing already. any advice will help.

Thank you in advance for the feedback!

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Whitney HuttenPro Member
Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
6y

@Alexander Reda Welcome!  You are on track asking the right questions.  In order to organize your search, create a spreadsheet and gather the following data points for the past 5 years for at least 7 midwest markets:

- unemployment

- job growth

- job diversification

- income growth

- population growth

- home pricing

- rent affordability

- vacancy rates

Also note, landlord / tenant laws and property tax rates

Once you have this, order your search based on trends (there isn't a perfect market either).  Pick 1-3 and dive into the local search for pockets of homes where the rents are 1%+ of the home valuation, income is 3x the rents, and crime is low (you can get more granular, but start here).  See which areas in those markets float to the top. Now you are ready to target PMs / realtors that service these areas.

All the data is on Factfinder at the Census website, but it's a little maddening to use.  You can also use ATTOM data and City-data as well.  

This may seem daunting, but you are doing the heavy work that most investors never do. PM me with Q's.

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  • Whitney HuttenPro Member
    Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    @Alexander Reda Welcome!  You are on track asking the right questions.  In order to organize your search, create a spreadsheet and gather the following data points for the past 5 years for at least 7 midwest markets:

    - unemployment

    - job growth

    - job diversification

    - income growth

    - population growth

    - home pricing

    - rent affordability

    - vacancy rates

    Also note, landlord / tenant laws and property tax rates

    Once you have this, order your search based on trends (there isn't a perfect market either).  Pick 1-3 and dive into the local search for pockets of homes where the rents are 1%+ of the home valuation, income is 3x the rents, and crime is low (you can get more granular, but start here).  See which areas in those markets float to the top. Now you are ready to target PMs / realtors that service these areas.

    All the data is on Factfinder at the Census website, but it's a little maddening to use.  You can also use ATTOM data and City-data as well.  

    This may seem daunting, but you are doing the heavy work that most investors never do. PM me with Q's.

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  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    6y

    @Alexander Reda  I would start with an area you have at least some connection to.  There are people making money in all markets.  A quick google search tends to point people to the midwest, and within the midwest, Indianapolis, IN, Columbus, OH, and Nashville, TN (sort of midwest) seem to be high on everyone's list.  They hit a lot of the metrics @Whitney Hutten outlined, BUT because of that and the existence of the lists themselves, returns are going down because a lot of money is coming in.  

    I wish you luck, but want you to come in with eyes wide open. Managing properties, even with PMs on the ground, is not a passive job, hence the reason Asset Managers, District PMs, etc exist.  The out of state investors that do it well, are in town frequently (more or less once a quarter) to meet PM, drive properties, etc.  On top of the more regular calls with PMs, reviewing financials, etc.  Direct ownership of real estate is more like a part time job than a passive investment.

    3Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    6y

    @Alexander Reda I would pick an area with an increasing job and population growth. Then I would build my team of 3 (Realtor, Contractor, and Property Manager). Then GO!

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  • Mark Allen Kenny
    Investor · New York City, NY · Member since 2016 · 155 posts · 105 votes
    6y

    @Alexander Reda Your criteria is great: Job growth, population growth, landlord-friendly, etc.

    If this is your first market, I would recommend somewhere close enough to drive to. You want to be able to get there quickly to network and look at deals. Once you gain experience and understand what to look for you can start branching out to markets pretty much anywhere. But I recommend starting somewhere close so you can walk a lot of properties in the beginning.  I live in NYC but choose Philly years ago because it was so close.

    1Reply
  • Matt Rodgers
    Aurora, CO · Member since 2019 · 8 posts · 4 votes
    6y

    I just wrapped up technically my first 2 deals within days of each other.  All while living in CO and all investment properties being located in IN.  It was a TON of work but it is possible.  All of the above is great advice, but for me the most important was having a great team in place, and the ability to respond quickly and effectively with everyone having the end "goal" in mind.  Regarding location, if you can piece together the right team it doesn't matter the location.  However, in my opinion it's much easier to start if you know somebody who lives near a specific location that interests you and is willing to help get started.   Feel free to message me with questions.  Good luck.

    1Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    6y

    @Evan Polaski

    Midwest has good returns, but a lot of OOS investors are pouring their money in so it’s getting more competitive. If you do go OOS and choose Midwest you need to be quick and have boots on the ground. Inventory has been decreasing nationwide so it can be tough. The rent ratio is still great compared to large cities and job growth is strong since people are migrating in.

    2Reply
  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    6y

    @Caleb Brown it is a hard time to be an investor these days, that’s for sure.

    I am taking the position of reallocating capital and not turning off investments, but it has moved to flips while the market is hot and socking away cash for when the correction happens again.

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    6y

    @Alexander Reda It sounds like you already have a good idea of how to start. The 3 most important factors on a macro level in evaluating a market in my opinion are 1. Population growth 2. Job growth and 3. Incomes. Once you've identified a handful of markets that look interesting, drill down to the micro level and study prices, rents, property taxes and insurance and landlord/tenant laws. Most of the macro level data can be found on the U.S. Census Bureau and Bureau of Labor Statistics web sites.

    0Reply
  • Alexander Reda
    OP
    Rental Property Investor · Member since 2019 · 48 posts · 14 votes
    6y
    Originally posted by @Whitney Hutten:

    @Alexander Reda Welcome!  You are on track asking the right questions.  In order to organize your search, create a spreadsheet and gather the following data points for the past 5 years for at least 7 midwest markets:

    - unemployment

    - job growth

    - job diversification

    - income growth

    - population growth

    - home pricing

    - rent affordability

    - vacancy rates

    Also note, landlord / tenant laws and property tax rates

    Once you have this, order your search based on trends (there isn't a perfect market either).  Pick 1-3 and dive into the local search for pockets of homes where the rents are 1%+ of the home valuation, income is 3x the rents, and crime is low (you can get more granular, but start here).  See which areas in those markets float to the top. Now you are ready to target PMs / realtors that service these areas.

    All the data is on Factfinder at the Census website, but it's a little maddening to use.  You can also use ATTOM data and City-data as well.  

    This may seem daunting, but you are doing the heavy work that most investors never do. PM me with Q's.

    Thank you for the reply! 

    I'll pm you. 

    1Reply
  • Alexander Reda
    OP
    Rental Property Investor · Member since 2019 · 48 posts · 14 votes
    6y

    Thank you everyone for the replies! Everyone has some valid information for me to utilize. @Evan Polaski thanks for the heads up. That will be a huge challenge to visit quarterly for me. Unfortunately, I don't have any personal connections with people in the midwest so the only boots on the ground I'll have is my agent and pm. 

    @Mark A. Kenny Thanks for the advice. I want to start locally but it's hard unless all I want to do are flips. Maybe I need to dig in a little more on the surrounding areas. Now that @Mike D'Arrigo gave me some input on what to look for in a market before digging in deeper, I should be able to research areas quicker. 

    All signs point to having a connection with someone of that area before diving in.. my question is, if you know no one, what would you do? 

    Thanks again in advance!!

    0Reply
  • Account Closed
    Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
    6y

    This question gets asked almost daily. You will receive a variety of answers. IMO, holding rentals out of state is for the experienced investor AND ONLY AND ALWAYS when the investor is able to have people working for them that they can trust to a very high level, like being able to trust them with your kids sort of level. That's a tall order if you're asking me.

    What I can never help but wonder is if it is so much work and hassle to find people, people you can trust, people you can work with, people you likely do not already have a relationship with, people you will inevitably take a risk with, why don't more newbie investors attempt to instead pool resources with other people locally??? In this day of social media and connectivity and all that, it just seems incredibly possible and maybe even easier??? I dunno.

    I say this for a couple of reasons. The first is that there is money to be made in all markets. That's a fact. The issue always comes down to if you have the money to play in that market or not. It is also a fact that attempting to manage a property from out of town is perilous and difficult. If people like you could instead pool resources with others locally, meaning money, time and experience, then you would eliminate the risks of investing out of town, reduce the risk of making a mistake, and save time by allocating tasks across multiple people. Of course obtaining financing with partners is another issue, this might only be possible with cash. That's a question for the financing people.

    I also think an option is to offer an equity position with a partner out of state. That personalizes the investment to the property manager. I suppose if a person is going to hire property management in any event, then it makes no difference. However, there is no doubt that a self-managed property is going to get the type of attention and bias it needs to maximize profit and minimize expenses. Never forget, property management makes money when you spend money, no matter how nice, fair or trusted they are and, nobody will ever tend to your money or make decisions about what is done or not with your better interests in mind than you. Of course, finding the right person to do something like that with is not easy. These arrangements usually happen with people who already have a trusted relationship (friends, etc).

    But I dunno...this is BP so, maybe the people I'm talking about are right here.

    0Reply
  • Melissa Veazie
    Real Estate Agent · Jacksonville, FL · Member since 2020 · 34 posts · 17 votes
    6y

    @Alexander Reda

    Jacksonville is listed as one of the best places to invest in 2020! With 14% population growth since 2000, future job growth prediction at 39.2% and Jacksonville is more affordable by 15% below the national average! We are a Landlord Friendly State! I can also connect you to a professional management company that can also help you with reaching your goal with your investment property!

    0Reply
  • Ron Singh
    CA · Member since 2014 · 244 posts · 47 votes
    6y

    @Melissa Veazie I am also looking investment property in that area, found few good ones but due to oos, its little tough to find right property management company to trust their screening process.

    just to prevent situation like tanent stops paying rent and give excuses only, have you had any situation like this and how your know property management dealt with them ?

    0Reply
  • Melissa Veazie
    Real Estate Agent · Jacksonville, FL · Member since 2020 · 34 posts · 17 votes
    6y

    @Ron Singh

    This is a situation that, unfortunately, all PMs run into from time to time but in my experience it’s something that can be mitigated with the right team. The screening processes used are thorough in order to vet quality, lasting tenants. In the event that, even when a tenant meets the qualifications and moves in, an event like this happens, having team members on the ground to assist in collection escalation matters, communication with the tenant and the investor, and the experience to know when it’s time to cut ties is crucial.

    0Reply
  • Justin Onyeador
    Investor · MD · Member since 2020 · 7 posts · 7 votes
    6y

    @Remington Lyman what purpose would the realtor have in this?

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    6y

    @Justin Onyeador A good Realtor will help you find and purchase the right investment.

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